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### Viewing cable 10ASHGABAT250, TURKMENISTAN: A TALE OF TWO BUSINESSES: LICORICE

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
10ASHGABAT250 | 2010-02-26 12:12 | 2010-11-30 21:09 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Ashgabat

`

    VZCZCXRO4188
    PP RUEHIK
    DE RUEHAH #0250/01 0571207
    ZNR UUUUU ZZH
    P 261207Z FEB 10
    FM AMEMBASSY ASHGABAT
    TO RUEHC/SECSTATE WASHDC PRIORITY 4301
    INFO RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
    RUCNCIS/CIS COLLECTIVE
    RUCNMEM/EU MEMBER STATES COLLECTIVE
    RUEHAK/AMEMBASSY ANKARA 6297
    RUEHBJ/AMEMBASSY BEIJING 3967
    RUEHKO/AMEMBASSY TOKYO 3826
    RUEHIT/AMCONSUL ISTANBUL 4541
    RHEHNSC/NSC WASHDC
    RHMCSUU/CDR USCENTCOM MACDILL AFB FL
    RUEAIIA/CIA WASHDC
    RHEFDIA/DIA WASHDC
    RUEKJCS/JOINT STAFF WASHDC
    RUEKJCS/SECDEF WASHINGTON DC
    RUEHVEN/USMISSION USOSCE 4436

` `

    UNCLAS SECTION 01 OF 02 ASHGABAT 000250

    SENSITIVE
    SIPDIS

    DEPT FOR SCA/CEN; EEB
    COMMERCE FOR DSTARKS/EHOUSE

    E.O. 12958: N/A
    TAGS: BTIO ECON BEXP PGOV EINV TX
    SUBJECT: TURKMENISTAN: A TALE OF TWO BUSINESSES: LICORICE
    AND MACHINE PARTS

    ASHGABAT 00000250 001.2 OF 002

    ¶1. (SBU) SUMMARY: Turkmenabat, Turkmenistan's second largest
    city, continues its role as a transport hub and industrial
    center, despite diminished regional commerce in the
    post-Soviet era. A large complex that processes
    locally-harvested licorice root continues to prosper due to
    the availability of inputs and a healthy export market. A
    machine parts factory has faced greater challenges, having
    been forced to find a new product line and relying solely on
    the domestic market. Unlike the licorice complex, which
    pre-dates the Russian Revolution, the machine parts factory
    was a Soviet creation that lacks an obvious market in
    Turkmenistan's current economy. Thanks to government
    subsidies, however, it does not appear that even a
    struggling, Soviet era enterprise is threatened with closure.
    Given its success at maintaining its production equipment,
    the factory could see better days if it found the right
    foreign partner interested in a low-cost metal parts. END
    SUMMARY.

    LOCAL LICORICE ROOT SUPPORTS AN INDUSTRY

    ¶2. (SBU) Poloff recently visited the Buyan Turkmenabat
    Agro-Industrial Complex, which specializes in the production
    of licorice extract in dry and paste forms. The licorice
    processing plant dates back to the Czarist era, when it was
    started by the U.S. firm MacAndrews and Forbes in 1906. A
    meeting with the director of the complex took place in the
    administrative building, adjacent to the processing plant.
    The plant was reportedly modernized in 2008 by a Chinese
    company, although the original 1906 press is still in use.
    The director of the complex declined poloff's request to tour
    the plant, saying that the equipment was currently undergoing
    maintenance prior to the start-up of the harvesting season in
    March. Instead, he offered to describe the process used to
    produce licorice extract, which is essentially a combination
    of steam and pressure applied to the harvested roots.

    ¶3. (SBU) Licorice root grows wild along the banks of the Amu
    Darya. Attempts to cultivate it have not been successful.
    The licorice root is harvested by the Buyan complex's own
    brigades. The harvest takes place between March and October,
    terminating after the first frost. During the Soviet period,
    the Buyan plant processed licorice root from Uzbekistan,
    Tajikistan, Kazakhstan and Azerbaijan. Since the end of the
    Soviet Union, the plant only processes licorice root
    harvested in Turkmenistan. Buyan has 600 employees, the bulk
    of whom work in its harvesting brigades. The company does
    not obtain licorice root from individual harvesters.

    ¶4. (SBU) The Buyan complex processes and sells unprocessed
    licorice root, as well as paste and powder extract. The
    powder extract is a new, higher value-added product,
    following modernization of the plant by the Chinese and
    installation of new equipment. The equipment in the plant is
    Chinese, Russian and American, the still operational
    U.S.-built press dating back to the plant's founding more
    than 100 years ago. Although the plant falls under the
    control of the Ministry of Healthcare and Medical Industry,
    it does not produce higher value-added consumer products such
    as medicine or candy, which are the primarily end uses for
    licorice extract. Buyan ships licorice extract to the U.S.,
    Japan, former USSR countries, China and Western Europe. The
    U.S. company Mafco Worldwide Corp. purchases about 2,000 tons
    of extract per annum, all of which is produced on the vintae
    U.S. press, according to the director. Thirty percent of the
    exports are licorice extract, with the remainder sent as
    dried root.

    MACHINE PARTS: WE'LL MAKE WHATEVER YOU NEED

    ¶5. (SBU) Poloff also visited an industrial machinery factory
    in Turkmenabat named "Agromash," which was established in
    ¶1973. The plant is part of the state-owned

    ASHGABAT 00000250 002.2 OF 002

    "Turkmenmashyngurlushyk" (Turkmen Machine Building)
    Enterprise, which falls under the Ministry of Energy and
    Industry. It is one of eleven such factories operated by the
    machine building enterprise at different locations throughout
    the country. The factory has mechanical and welding
    sections, as well as a section for the reconstruction and
    testing of Russian-built YaMZ diesel engines. Greeted by the
    company's director, Muratjan Jumakulyiev, poloff was
    immediately led to the Soviet-era plant's massive shop floor
    in a soaring, hangar-like structure. The better part of the
    shop floor was devoid of activity, although a handful of
    workers were operating some of the equipment. The plant
    remains fully equipped with Soviet-era machine tools such as
    metal lathes and drills. An adjacent building houses a
    foundry with two rows of furnaces for melting metal.
    Although the factory has a capacity to produce 1,800 tons of
    iron and steel castings per annum, and 250 tons of
    non-ferrous metal castings, during the visit none of the
    furnaces were operating.

    ¶6. (SBU) While the factory plant had once specialized in the
    repair of road grading equipment, it no longer performs that
    work and is now clearly scrambling for business for its line
    of products. The factory can also fabricate custom-ordered
    machine parts based on a client's specifications. Agromash's
    product line includes clay mixing machinery for use on
    drilling units; trailers that provide temporary housing and
    offices on construction sites; circulation systems for the
    preparation and storage of drilling solutions for oil and gas
    wells; rototillers; and ironwork such as ornamental fences
    and manhole covers. There was one massive circulation system
    on site ready for shipment, and at least a dozen trailers
    featuring various interior configurations. The factory
    currently does not export its production, although it does
    sell to foreign companies doing business in Turkmenistan.
    The factory's director proposed that U.S. firms could order
    custom machine parts and Agromash could produce them at a
    fraction of the U.S. cost. He also thought the company's
    housing/office trailers could find useful applications in
    Afghanistan,

    ¶7. (SBU) COMMENT: The Buyan licorice complex clearly has a
    longstanding market niche dating back to the early 20th
    century. Even though the complex lost its regional role
    following the break-up of the Soviet Union, its continued
    exclusive access to its basic input, licorice root, and
    well-developed export demand have provided it with continuity
    and favorable prospects. Agromash, on the other hand, had to
    find new lines of business in the post-Soviet Turkmen economy
    and lacks the wherewithal to develop export markets. While
    the factory did not look busy, it has managed to maintain its
    equipment intact, thanks to state support, and could present
    an opportunity for a foreign partner looking for a low-cost
    supplier for machine parts. END COMMENT
    CURRAN

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